Being on a tight budget does not mean that you have to learn to live with debt. Find out what you can do to reduce and eliminate debt on a tight budget.
Key Points:
- You can reduce and eliminate your credit card debt even if you’re on a tight budget.
- Focus on reducing your spending and your interest rates.
- Use a credit card debt relief method such as the Snowball or Avalanche method to reduce your debt.
- Seek professional help if you can’t handle your debt on your own.
Mismanaged credit card payoff can eat up your income quickly, regardless of how much you make. If you don’t earn much, you may feel that you'll never manage to pay down debt. However, you should never give up on your financial future - no situation is hopeless. By creating a budget with the right approach and good money management going forward, you can pay off debt on a tight budget.
How do you approach your credit card debt problem on a tight budget, though? Do you look for help right away, or should you give it a try on your own?
Your tight-budget debt management plan should include the following action items:
- Use your credit wisely and track your spending.
- Reduce your credit card spending and save more, so you can make heftier payments toward your debt.
- Check your credit card statement and try to lower your monthly payments, thus getting lower interest rates.
- Protect your credit score from damage.
See How Much You Spend and Review Your Current Credit Card Debt Situation
Much like you’d do if you were headed on a road trip to a new destination, you must know where you are before you can plot a course to where you want to be.
If you use credit cards, you need to know where your money is going, what debts you have, and which to address first. Make a note of each of your credit cards, travel credit cards, and other loans for bad credit, along with the interest rates you are paying on each. Sometimes, seeing your credit card debt on paper or a spreadsheet can help you figure out how to use your card properly, where to begin on your journey, and how to build your credit rating again.
First of all, create a budget. A solid budget lies at the core of every debt management plan because it gives you the tools to cut your expenses and redirect money toward your credit card account and debt bill payments. You can do your monthly budget with this free template. You can also use a card payoff calculator to estimate how long it will take to pay off your debt.
Stop Using a Credit Card for Purchases
In addition to paying more than the minimum payment on each of your credit cards, the best way to lower your bills is to reduce credit card transactions for purchases.
That does not mean you should cancel your credit cards! You only need to manage your credit card balance. By closing your credit cards, you may alter your credit utilization ratio and shorten your lines or credit history, thus actually hurting your credit score.
Cut Your Expenses to Pay Off Credit
The point of a budget is to help you find the right financial goal. Since your current goal is to pay off your bills on time, you must save as much money as possible. To maximize your weekly or monthly savings, reach out for the best high-yield savings accounts.
Review all your non-essential, discretionary expenses and give them a healthy trim. For instance, if you are saving to pay off debt, consider how much you’re eating out. Think of ways to cut down your personal expenses, such as trimming down your streaming products and services or getting rid of cable services. Trade in your gym membership in favor of working out at home. Be creative in finding ways to save.
You can also optimize your recurring, essential expenses. Set the thermostat to a more wallet-friendly mode, and try to complete your grocery shopping for less. Check your car insurance rates and get quotes to see if you can get the same coverage for less with another company. Sell the possessions that you no longer need. Optimize your life from a financial perspective.
Be Proactive about Reducing Your Monthly Payments
Sometimes you can get the best results by being proactive. Reach out and try to reduce your monthly credit card balances by all possible means.
Don’t be afraid to call credit card companies and ask for reduced interest rates. After all, the worst that can happen is that they say no. You never know what creditors may offer until you ask, especially if you have had a good relationship with them for some time.
Pay more than the minimum payment when possible. The more you pay now, the more money you will save on the interest that you will never incur. The best way is to pay your bills in full if you can.
If your credit score is good, you may also be able to reduce your interest rates through a balance transfer credit card or a debt consolidation loan.
Focus on Paying off Your Debt
Think strategically about paying off your debt. If your outstanding debt is less than $5,000, try the avalanche or the snowball method of debt reduction.
Snowball or Avalanche your way to freedom from debt.
With the snowball method, you pay off your smallest balances first. This way, you can make visible progress from the beginning and motivate yourself to keep going.
With the avalanche method, you pay off your most expensive debts first. That means the accounts with the highest interest rates. Then, as you finish paying one card, you simply work on paying the next highest interest rate card, and so on.
Search for Credit Card Rewards
A rewards credit card can help you earn cashback or points on essential purchases, but only if you use it wisely and pay off the balance in full each month to avoid interest.
Explore the best bank bonuses available when opening new accounts. Many banks offer sign-up bonuses for new customers that can give your savings a quick boost.
Additionally, compare the best CD rates and best checking accounts to make sure you're earning as much as possible on your deposits. Similarly, look into the best savings accounts that offer high yields and no fees.
When to Get Professional Debt Relief
When you owe $10,000 or more on credit cards, student credit cards, or other personal loans, you may need professional help to get out of credit card debt. Professional debt relief includes strategies such as:
Credit counseling and debt management plans help you pay off your entire debt load by offering you a viable roadmap and helping you stick to it.
Bankruptcy should be considered a last resort for relieving your debt burden, as it has detrimental consequences on your credit score.
Through debt settlement, a company such as ClearOne Advantage negotiates the forgiveness of some of your debt, giving you significant savings. If you are on a strict budget, you may find this solution particularly appealing.
How much can you save through a Debt Settlement Plan? Call a ClearOne Advantage Certified Debt Specialist at 866-481-1597 and get a free savings estimate today.
